Since time began, well at least ‘commerce’, merchants have required their customers to make deposits on goods, merchandise, and services to be delivered or rendered at some time in the future. These ‘deposits’ have been called by a variety of names including ‘customer deposit’, ‘down payments’, ‘prepayments’, ‘earnest money’ or ‘retainers.
Each of the terms tends to be associated with the type of goods, merchandise, or services. For example, you might have to give a lawyer a ‘retainer’ up front for him (or her) to take your case. Another example would be if you went to the Ford Dealership and custom ordered a F350 Heavy Duty, Dual-rear wheel, King Ranch, 4x4 Pickup, the dealership would require you to pay your purchase ‘down payment’ at the time of the order. And as one more example, if you sign a contract to purchase a home, you are typically required to put “earnest money” into escrow or pay it directly to the seller at the time the contract is accepted.
With all these examples of the use of deposits in real life you would think that QuickBooks would have had a way to accept and properly account for such funds, but that has not been the case until recently. Oh, there were plenty of work arounds that QuickBooks users identified, but all too often the accounting those work arounds created did not conform to Generally Accepted Accounting Principles (GAAS).
For example, many users found ways to debit cash and record a liability to ‘customer deposit’ account reflecting proper accounting but then trying to reverse that out so that the payment could be applied to the A/R Invoice posted when the customer was finally billed was complex and cumbersome. While a simpler alternative of recording a payment against a customer’s account with a zero-balance worked for many people, the resultant ‘negative’ Accounts Receivable was inconsistent with GAAP accounting principles.
But, as I said earlier, QuickBooks has finally found a way to simplify the process of accepting customer deposits and properly track those deposits against work to be performed while also accurately reflecting the value in accordance with GAAP standards.
Now, QuickBooks users can create an invoice with invoice deposits so that they can get paid at the moment of the transactions. Further, with the ability to enter a customer’s credit card or ACH details, the deposit can be processed quickly.
To use this marvel of accounting you must turn the feature on in QuickBooks. This changes your invoices by adding a ‘Deposit field’:
1) Go to Settings ۞ then select Account and settings.
2) Go to Sales.
3) In the Sales form content section, select Edit.
4) Turn on Deposit.
5) Select Save, then select Done.
Once set up, use the following steps to add a deposit to an invoice:
1) Go to All apps, then Sales & Get Paid, then Invoices.
2) Find the invoice you want to add a deposit to, then select Edit
3)Enter the amount in the Deposit field.
4) From the Deposit to ▼ dropdown menu, select Payments to deposit or Undeposited funds.
5) Select Save and close.
You've collected your deposit, received it, and recorded it properly. How much easier could it get!
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